Tax Type
Corporation Income Tax
Description
Modifications to federal taxable income; Depletion
Topic
Computation of Income
Subtractions and Exclusions
Date Issued
12-08-1986
December 8, 1986
Re: §58.1-1821 Application: Corporation Income Tax
Dear ****************
This will reply to your letter of June 30, 1986 in which you protest the assessment of corporation income tax and interest against Taxpayer for the fiscal year ended June 30, 1985.
Facts
On its federal corporation income tax return for the fiscal year ended June 30, 1985, Taxpayer claimed depletion in the amount of *************. On its Virginia return for the same period, Taxpayer took as a subtraction from its federal taxable income depletion in the amount of ****** on audit such subtraction was disallowed, and tax and interest were assessed. Taxpayer asserts that the subtraction represents depletion which is properly allowable under Section 613 of the Internal Revenue Code and is necessary to arrive at the amount it considers to be federal taxable income for Virginia income tax purposes. Taxpayer claims that it elected to take federal credits in lieu of depletion. An examination of Schedule J of Taxpayer's federal return reveals that Taxpayer did not have sufficient tax liability to use fully both the credit for fuel produced from a nonconventional source and the additional allowable depletion.
Determination
Taxpayer is correct in noting that federal taxable income is the starting point for computing Virginia taxable income. Pursuant to §58.1-402 of the Code of Virginia and the Corporation Income Tax Regulations, VR630-3-402 A., Virginia looks to the amount reported on line 30 of the federal return as being the proper amount of federal taxable income for the applicable tax year. For whatever reason, Taxpayer chose not to claim depletion in the amount of *************in computing its federal taxable income. Va. Code §58.1-402 C. strictly delineates what subtractions are permitted from federal taxable income. Depletion is not a permitted subtraction. Accordingly, there is no authority to withdraw the assessment, which is valid and remains due and payable. However, I might note that whenever Taxpayer properly claims depletion on its federal return, it will automatically receive a Virginia tax benefit.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner